Dubai ranks as the third most affordable major city for purchasing prime residential property, according to the World Cities Prime Residential Index (H1 2019) released by Savills, a global real estate services provider.

While the analysts identify that Dubai property prices have dropped over the past five to 10 years, investors willing to hold property as an investment for a longer period of time can take advantage of attractive yields, it said.

According to Savills Research, Prime Residential price per square foot in Dubai was $600. Kuala Lumpur topped the most affordable list with $260 per sq ft and Cape Town came second with $330 per sq ft.

In-house Savills research into prime residential rental yields, pinpoint Dubai as the fourth-best global hub for returns on investment (4.6 per cent).

Swapnil Pillai, associate, Research Middle East at Savills, said: “It is a good opportunity for domestic and foreign investors to look at Dubai. Firstly, because the time is right as it is far more affordable to purchase prime residential property now due to lower transactional costs and overall lower prices when compared to other major cities.

"Investors are paying less for top class specifications. Secondly, strong rental yields mean that long-term investors could generate robust annual returns when letting out a property in the city.”

It is transparent that capital values in Dubai have not grown at the same rate as other global destinations over the past 10 years, but that is not to say that the next 10 years will mirror this. In Dubai, demand is still strong; however, a mismatch of supply and demand has compressed prices. As supply/demand balances out over time, prices will adjust accordingly, so investment towards the bottom of the cycle could be a shrewd move.”

Price growth across the world’s leading prime city housing markets has continued to slow during the first half of 2019, rising by just 0.4 per cent, taking the annual growth to 0.7 per cent. This compares to an annual increase of 5.1 per cent in the year to June 2018.

“There are a number of reasons why the prime residential markets in global cities are seeing a slowdown, with Government policy, the cost of money, increased supply and global economic uncertainty all playing their part,” said Sophie Chick, head of Savills World Research. “Despite this, we do not expect significant price falls across the index, but that growth will remain flat or experience small increases in value in the medium term.”

Latest data from Savills World Cities Prime Residential Index shows that Berlin and Paris have seen standout growth for prime residential property of approximately four per cent over the last six months and eight per cent over the last year. Both markets have low supply levels coupled with increasing demand from domestic and international buyers.

The six months to June 2019 also marked a turning point for a number of Chinese cities as prices increased following falls during the second half of 2018. This follows a slight loosening of housing restrictions as their economy slows. Hong Kong, which still has the most expensive residential property in the world at $4,730 per sq ft / €45,400 per sq m, saw growth of 1.3 per cent.

A similar pattern was seen in Moscow where prices increased by 1.2 per cent following years of price falls as Russian money returns to the capital due to the scrutiny of Russian money overseas.

Elsewhere in Asia, Kuala Lumpur and Bangkok, where prices are $260 and $880 per sq ft respectively, both saw prime prices rise by nearly 2.5 per cent in the first half of the year.

Conversely, many of the cities in the US have seen price falls over the first six months of 2019 due to recent tax changes impacting demand and, in the case of New York and Miami, high levels of stock on the market.

In Sydney and Cape Town, values have increased significantly over the past five years but are now experiencing price falls as affordability, amongst other things, slows the market. Prime prices in Dubai have fallen 20 per cent in the last five years due to high levels of new-build stock and global economic uncertainty.

Sophie Chick added: “Over the short term, we expect to see European cities continue to outperform as they benefit from Brexit and comparably lower prices on a global scale. Over the long term, wealth generation will be critical to the growth of the city’s prime residential markets along with political and economic stability and favourable demographics.” – TradeArabia News Service